11:43 pm - February 4, 2026
The stock market experienced significant turbulence on Tuesday as investors pulled back from high-flying technology stocks while oil prices surged amid escalating Middle East tensions. The selloff was particularly pronounced in the legal software sector, where shares plummeted following Anthropic’s announcement of new artificial intelligence tools designed to handle compliance tracking and legal document review.
Legal software companies saw dramatic declines, with many stocks falling by double digits, according to market reports. Meanwhile, the Cboe volatility index surged nearly 20 percent after the United States confirmed it had shot down an Iranian drone, reigniting concerns about regional stability and energy supplies.
Tech Stock Selloff Accelerates Market Rotation
The stock market selloff reflected growing investor anxiety over elevated valuations in the technology sector, particularly as earnings season continues. Many top-performing tech and artificial intelligence stocks in the S&P 500 declined as traders sought opportunities in other market segments that appeared more attractively priced.
However, the rotation into value stocks gained momentum during Tuesday’s session. FedEx shares climbed more than 5 percent, while major retailers including Walmart, Target, and Costco posted gains of up to 2 percent as investors diversified their portfolios away from high-growth technology names.
Oil Price Spike Raises Inflation Concerns
Energy markets reacted sharply to geopolitical developments, with Brent crude rising 2 percent to approximately $67.50 per barrel. The international benchmark has now increased 11 percent from its December low, while US oil prices similarly advanced 2 percent to around $63.50 per barrel.
Additionally, market participants expressed concern that rising oil prices could reignite inflationary pressures on the US economy. “These higher energy prices will add to inflation pressure,” Louis Navellier, chairman of Navellier & Associates, wrote in a note during the tech selloff.
AI Investment Concerns Weigh on Stock Market Performance
The enthusiasm for artificial intelligence investments has shown signs of wavering as investors scrutinize the massive capital expenditures technology companies are making without clear visibility on returns. Microsoft shares declined following its earnings report as market participants questioned the sustainability of current AI spending levels.
In contrast to earlier optimism, traders are now carefully monitoring whether the AI trade that drove much of last year’s market gains remains viable. “The enthusiasm for AI rolls through peaks and valleys,” Navellier noted in his commentary on the market action.
Major Indexes Recover From Session Lows
The major stock market indexes initially plunged deep into negative territory during the early afternoon before staging a partial recovery. The Dow Jones Industrial Average clawed back much of a decline that exceeded 500 points at one stage, while the Nasdaq Composite ended the session down 1.4 percent after falling more than 2 percent during intraday trading.
Meanwhile, investors have been closely monitoring oil prices throughout the year due to ongoing geopolitical tensions between the United States and major crude producers including Venezuela and Iran. Some forecasters had previously warned about the possibility of an oil shock, where supply disruptions could cause crude prices to jump sharply and damage economic activity.
Market observers will be watching for further developments in Middle East tensions and their potential impact on energy prices in coming sessions. The trajectory of technology earnings reports and corporate commentary on artificial intelligence investments will also likely influence near-term stock market direction, though the timing of any stabilization remains uncertain.
